Home Loan Tax Benefits

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Home Loan Tax Benefits

Taking a home loan? You can save a huge amount of money every year with the tax benefits offered by the Government of India under the Income Tax Act of 1961.

As a home loan borrower, you can claim tax exemption on principal repayment every year under Section 80C, interest payments under Section 24 (b), and an additional benefit on interest under Section 80EE if you are a first-time homebuyer.

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Quick Look at Tax Benefits on Home Loan for FY 2021-22

The table below gives you a quick overview of how much you can save on tax with your home loan:

Tax Benefits on Home Loan (FY 2021-22)
Income Tax Act Tax exemption
Section 80C Upto Rs 1.5 lakhs on principal repayment
Section 24(b) Upto Rs 2 lakh on interest payment
Section 80EE Additional benefit of upto Rs 50,000 on interest payment for first-time homebuyers

Home Loan Tax Benefit Under Section 80C

The Section 80C of Income Tax Act allows home loan borrowers to claim income tax deduction of upto Rs 1.5 lakh on the principal amount repaid during the year.

There are certain conditions involved for claiming tax benefits under this section:

  • The construction of the house must be completed before you start claiming deduction under Section 80C.
  • You must not transfer / sell the property within 5 years of possession. If sold within 5 years, all deductions you may have already claimed will be considered as your income in the year of the sale of property.

Home Loan Tax Benefits Under Section 24(b)

Under the Section 24(b) of the Income Tax Act, you can claim income tax deduction of upto Rs 2 lakh on the interest payments on your home loan.

Take a look at the conditions involved in claiming tax benefits under this section:

  • This limit of Rs 2 lakh applies only if the property is self-occupied.
  • If the property is rented out (or not self-occupied), there is no maximum limit for claiming interest.
  • You must purchase the property or complete the construction within 5 years of taking the loan.

Home Loan Tax Benefits Under Section 80EE

If you are a first-time homebuyer, you can claim tax deduction under Section 80EE. This section allows additional tax deduction of upto Rs 50,000 on the interest payment on home loan. In other words, this deduction is over and above the exemption of Rs 2 lakh allowed under Section 24(b).

Check out some of the conditions applicable in claiming tax benefits under Section 80EE:

  • The loan should have been taken between 1 April 2016 and 31 March 2017.
  • It should be the borrower’s first property purchase.
  • The value of the home should not be more than Rs 50 lakh, while the home loan should not be more than Rs 35 lakh.

Section 80EEA - Income Tax Deduction for Interest Paid on Affordable Housing Loan

This section was launched in the 2019 Union Budget by the Finance minister Nirmala Sitharaman with the purpose of boosting the “housing for all by 2022” programme.

Under Section 80EEA, homebuyers can avail an additional tax deduction of Rs 1.5 lakh on interest payment on the home loan. This is over and above the tax exemption limit of Rs 2 lakh allowed under Section 24(b).

While presenting the Union Budget for FY 2021-22, the Finance Minister extended the benefits under this section till March 31, 2022.

Conditions for claiming the deduction under this section are as follows:

  • Only first-time homebuyers can avail benefits under this section. Therefore, the borrower should not have any other residential property in their name.
  • Deduction can only be claimed for interest payment on the home loan.
  • The home loan should have been taken between 1 April 2019 and 31 March 2021.
  • The value of the property should not be more than Rs 45 lakhs.
  • You cannot claim tax benefits under Section 80EE.

What Tax Benefits are Available on Joint Home Loans?

You can avail bigger tax benefits if you are applying for a home loan jointly. In case of a joint home loan, you and all other co-applicants can claim income tax benefits individually. Each co-applicant is eligible to claim tax deduction of upto Rs 2 lakh on interest payment and Rs 1.5 lakh on principal repayment.

To be eligible for claiming tax benefits, make sure that every co-applicant is also the co-owner of the property.

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Disclaimer: The information available on this site has been gathered from publicly available sources and is accurate to the best of our knowledge. However, please be aware that the rates and other offers may vary based on your profile and may be subject to change without notice. Therefore, we advise you to verify the information before applying for any loan through this website. Magicbricks accepts no liability for any loss arising from the use of the information on this website. Refer T&C for the detail.
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*These calculators are only for illustrative purposes. These figures may or may not be applicable to your particular situation. Magicbricks will not be responsible for any loss or liability arising from the use of these calculators.